#DigitalSkeptic: The Year In Information Dumbness

NEW YORK (TheStreet) -- Every year, it seems the Information Economy just can't get any dumber. Somehow it does.

Perhaps it's the crisp air, or the family magically getting along -- or that we've simply survived another 12 months. But there it is, this time of year: that tingle of hope that maybe, juuuuust maybe, this past spin around the sun will be the one where the Three Stooges Information Economy finally cuts out the investor pratfalls. Finally, legit business logic finally will grab a spot at the Digital Age musical chairs.

The actual dollar damage 2013 will inflict has yet to be totted up. Most major, pure-play information companies report their annual results in early 2014, so those critical, full-year performance figures are still a quarter or so away. But Warren Buffett-like vision will not be required to realize this past year was a year when, bull market or no bull market, investors paid more, got less and took on nearly absurd risk.

"I'm dubious about all the good news out there," said Cleveland, Ohio-based real estate investment exec Bruce Ratner, chairman of Forest City Ratner Cos.. He's the fellow who had the guts to bet on developing downtown Brooklyn all the way back in 1980s. "The markets are basically kind of like this," he said, wobbling his hand out in front him like a dinghy fighting through an ocean storm. "And that's on a good day."

"It's still pretty bad out there," he said.

In the spirit, therefore, of hoping that this year might truly be the stupidest the Information Economy ever gets, here's what took the gold, silver and bronze for Dumbest Trends in 2013.

1. Not keeping the bull market bull#@$% straight
This year showed investors exactly what goes south when investors gin tech stocks north without a clue for why they're paying the premiums they are. The only thing higher than the share prices for Google (GOOG), Amazon  (AMZN) and Facebook  (FB) was the pile of investor rationales for the crazy prices they paid.

Quick test: In four words or less, describe exactly how this year's top Information Age value stories -- say, the Google Glass immersive computer device, or Amazon's Prime Air flying drone delivery technology or streaming music services Pandora  (P) or Spotify -- actually make money? Is it:

A) Increasing advertising revenue
B) Increased customer fees
C) Decreased costs
D) All of the above

The answer of course, was "D) All of the above." This year, the Information Economy tried to be all things to all investors -- which really makes its worth nothing to anybody.

"It's amazing to me how poor a job the Web has done in explaining how the basics of the business actually work," Chas Edwards, a new media entrepreneur and co-founder of Federated Media, told me. "It's been a long time to still not know what drives this business."

2. The profitless bull
We should only be so lucky that 2013's recovery was merely a jobless one. What made the this year's stock run-up downright lethal was that bottom-line net profits were as tough to find as a good job.

Investors seemed unaware that Amazon not only burnt money at about the same rate as domestic rail carrier Amtrak, but is on track to run in the red for a second full year. And forget the bellwether public offering for microblogging service Twitter (TWTR). Its losses were somehow spun as meaningless in the face of mere optimistic gross and operating margins -- which makes no sense for a company that does all its work on computers. After all, does anybody really know what the "cost of goods sold" is for Twitter? Or Facebook? Or Google?

"Why is it such an issue for company managers to step forward and admit they overreached and that what the upside investors are betting on maybe happens a little later," is how Andrew Left, executive editor of Citron Research, explained it to me. "But nope, quarter in and quarter out, it's always better and better, more and more, even though that can't possibly make any sense."

3. Stocks go up ... because they go up
But what really made 2013 a dangerous trip into the Twilight Zone is that whatever comparable valuation logic existed in this sector is now merely science fiction. On one hand, stars such as Google saw a 52-week low of $625, but now somehow trades at $1,000-plus even though net margins declined for that period. Huh? Then there's eBay  (EBAY), one of the Web's real profit-making engines, which saw a 52-week low of $48 but only posted a high of $58 on what was basically a story of improving net margins for the year.

What's happening? Simple: More investors are piling onto some stocks, so more investors pile onto those stocks. The fundamentals of a company no longer matter.

"All I do is look for buyers to be in control on a share and then I buy it," said Rick Tonge, owner of Tonge Investments, the Oakland, Maine, investment adviser who says he's on track to post one phat year for his clients. And then when sellers take over, I step out of the way and sell."

"I don't bother with any other reality but that," he said. "I haven't looked at an income statement for years."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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